Australian retailers are feeling the pressure this year with many offering substantial discounts on their products to get consumers in the door.
While many retailers have traditionally left it until Boxing Day before slashing their prices, plenty have brought their sales forward by a couple of weeks in recent years to attract shoppers away from rival stores and into their own.
Last year it was JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) feeling the heat amid fears Dick Smith (which has since collapsed) would offer fire-sale prices on its own goods. According to The Australian Financial Review, some companies this year are discounting their products by as much as 70%, whether it be due to strategy or necessity.
For some clothing retailers, it may be more out of necessity. Victoria and Tasmania have had a slow start to summer, despite the occasional sweltering day, which may have impacted demand for some summer gear. As such, national retailers may be forced to offer nationwide discounts to clear some of those products which could impact on their margins for the half-year period.
For example, The AFR noted discounts of 30% at Myer Holdings Ltd (ASX: MYR) for some wide-ranging clothing brands, with Portmans, owned by Premier Investments Limited (ASX: PMV) also offering significant sales.
Others, however, could well be offering their discounts early as a strategic move. By offering deep discounts in the weeks before Christmas, that could encourage consumers to spend more, thus turning over more product, with volumes making up for lower prices.
Indeed, a report released by the Australian Retailers Association (ARA) in November, combined with Roy Morgan Research, showed annual Christmas spending figures indicated local shoppers would spend more than $48.1 billion in retail stores over the Christmas trading period. Notably, that period extends from November 15 to December 24.
ARA's chief executive, Russell Zimmerman, noted in The AFR today that "at this stage we think we're on target to get that $48.1 billion" – although that could be dependent on a "big rush at the very end," which is reportedly expected by most retailers.
Foolish takeaway
The Christmas trading period is typically the most important time of year for most retailers as people spend up buying items for their loved ones. As such, how their shares perform early next year could largely depend on their operational performance over the next couple of weeks.
